When the Brazilian economy began to stall last year, officials in Latin America’s largest country started pulling pages from the playbook of another major developing nation: China.

They hiked tariffs on dozens of industrial products, limited imports of auto parts, and capped how many automobiles could come into the country from Mexico — an indirect slap at the U.S. companies that assemble many vehicles there.

The country’s slowdown and the government’s response to it is a growing concern among U.S. officials worried that Brazil may be charting an aggressive new course — away from the globalized, open path that the United States has advocated successfully in Mexico, Colombia and some other Latin American nations, and toward the state-guided capitalism that the United States has been battling to change in China. As the world economy struggles for common policies that could bolster a still tentative recovery, the push toward protectionism by an influential developing country is seen in Washington as a step backward.

“These are unhelpful and concerning developments which are contrary to our mutual attempts” to strengthen the world economy, outgoing U.S. Trade Representative Ron Kirk wrote in a strongly worded letter to Brazilian officials that criticized recent tariff hikes as “clearly protectionist.”

And Brazilian officials are very, very clear about exactly why they are doing what they are doing:

Brazilian officials insist the measures are a temporary buffer to help their developing country stay on course in a world where they feel under double-barreled assault from cheap labor in China and cheap money from the U.S. Federal Reserve’s policy of quantitative easing.

“We are only defending ourselves to prevent the disorganization, the deterioration of our industry, and prevent our market, which is strong, from being taken by imported products,” Brazil’s outspoken finance minister, Guido Mantega, said in an interview. Mantega popularized use of the term “currency war” to describe the Federal Reserve’s successive rounds of easing, which he likened to a form of protectionism that forced up the relative value of Brazil’s currency and made its products more expensive relative to imports from the United States and also China.

How long until other nations join with Brazil in declaring trade measures against the United States is uncertain, but there may be few other options on the table for creditors wanting to get their pound of flesh, or nations wishing to protect domestic industries. After all, the currency wars won’t just go away; competitive devaluation is like trying to get the last word in an argument. The real question is whether the present argument will lead to a fistfight.

[…] the general trend is “the end of the “social-democratic” version of capitalism, with “neo-liberalism” as the only version that is competitive enough (as it breaks the working class down to coolie status).

But what about the other nations? We’ve already mentioned that they are all engaged in money-printing (“currency wars’) in order to bail-out the banks and indirectly reduce the wages of the workers, thus making them “more competitive”.

But as they are still failing to “restore their competitiveness”, protectionism is a rising trend – here’s a WTO report: http://www.cnbc.com/id/45666403
[…]
WTO in right – ” the less they co-operate on international issues, the more difficult exiting this global crisis will be”. Then again, capitalism has never been about “cooperation” between the nation-states , it’s always been about them competing against each other, , over economic and political power (“law of the jungle”).

This cartoon colorfully demonstrates the doctrine of “mutual destruction”, where two opposing factions destroy each other precisely because of the competition between them. The doctrine of “mutual destruction” became very popular during the “Cold War” between the U.S.A. and the former USSR, as each one of these two superpowers had the firepower to potentially to destroy the other.

However, this doctrine of “mutual destruction” can be applied on many occasions – and one of them is a return to protectionism.

After all, a return to protectionism was exactly what the nations-states did during the Great Depression of 1929: As the states are competing against each other, each one “attacks” the exports of the others, by imposing duties on their exports.

Protectionism is by nature NOT a “creative” policy – quite the opposite, it is a “destructive” policy. More – it is a “mutual destruction”, as country A targets and hits state B’s exports, which leads the state B to hit back at the exports of country A, etc.

Those who advocate a return to protectionism claim that they want to help domestic production to grow. But what protectionism actually does is not to help domestic production to grow, but to hurt the production of the other states. The end result is the collapse of global trade (this is what happened during the Great Crash of 1929). Many historians even believe that this collapse in trade, which exacerbated the crisis, was as a major cause for the outbreak of the Second World War.

– From an ideological standpoint, protectionism leads to the rising of nationalism (eg “we are Americans so we must buy American products”, “we are English so we must buy English products”, “we are German so we must buy German products”, etc.).

– From an economic perspective, protectionism brought about an even greater collapse of world trade. Every worker essentially sided with his domestic ruling class, in hitting the workers of the other states. Rather than attack against their exploiters, the workers started hitting each other. And as each state’s ruling class started attacking against the ruling classes of the other states, each state destroyed some parts of the other state’s productive base, causing even more bankruptcies, and workers suffered even more, as unemployment spiked. However, in some sectors of the economy, this return to protectionism actually did create (or retained) jobs, but at the same time it deprived us of other jobs in other sectors, due to tariffs that were making a lot of exported goods not-competitive. Duties caused prices to rise, and ultimately consumption fell even further, as the workers could not afford to buy those expensive imported goods, and the depression deepened.

Unless we overthrow the capitalist system, which gives wealth and power to a handful of capitalists, who in order to maximize their profits go to Asia, leaving the West to rot, we can only expect poverty for the workers, and increasing trade wars, that could escalate to a full scale war […]

I wonder whether China and other holders of Treasury debt would be willing to swap their bonds for negative interest bonds. 90 cents on the dollar seems like a pretty good deal versus nothing down the road, especially since the purchasing power would be enhanced by a credible issue of negative interest bonds.

With the obvious exceptions of Singapore and Hong Kong (which are basically ports and exchanges: city-states rather than nations) there have been no ecomonic “miracles” that were not founded upon the principle of protectionism. Usually, protectionism meant preserving domestic ownership and control over land, industry, and banking. But a by-product of this form of policy was protection for the domestic labor force.

It is not communism nor unionism -and not even chauvinism- to promote an economic system, built upon a social contract between management and labor, whereby employees should get a “fair share” of the revenue generated by the business entities which employ them. Globalization has torn apart that contract, which was in force from the time or T. Roosevelt and Henry Ford until the time of Bill Clinton and Newt Gingrich. And it cannot be repaired until globalism is trashed and state-guided capitalism is restored.

By any sane, rational measure, I would argue, the costs produced by war or even smaller variations of physical aggression far exceed any potential benefits. Speaking of measurements, has Nate Silver met his match?

The entire history of the human social behavior is about taking what the other guy has, and war has been the vehicle to accomplish such, justified by all institutions to this day [especially Religion].

In the last couple of centuries [especially post- WWII], much of this aggression has been on the financial front, but, when push comes to shove, it’s hard to stand-up against 5000+ nuclear weapons that make a compelling case for submission.

According to Soviet dissident Vladimir Bukovsky, “In 1992 I had unprecedented access to Politburo and Central Committee secret documents which have been classified, and still are even now, for 30 years. These documents show very clearly that the whole idea of turning the European common market into a federal state was agreed between the left-wing parties of Europe and Moscow as a joint project which Gorbachev in 1988-89 called our ‘common European home’.” (interview by The Brussels Journal, February 23, 2006).

On June 8, 1995, the British Conservative Member of Parliament Christopher Gill quoted The Perestroika Deception during a House of Commons debate, saying: “It stretches credulity to its absolute bounds to think that suddenly, overnight, all those who were Communists will suddenly adopt a new philosophy and belief, with the result that everything will be different. I use this opportunity to warn the House and the country that that is not the truth”; and: “Every time the House approves one of these collective agreements, not least treaties agreed by the collective of the European Union, it contributes to the furtherance of the Russian strategy.”[18]

The problem with forcing kindness through States is that it detracts from groups or people who naturally choose to be kind; it makes kindness less visible, and it fails to promote the virtue of being kind so that people strive to embody such endearing attributes for the benefit not just themselves but also their family, and even their wider community. Good people don’t need forcing! They rise naturally.

Yet the country’s economic dip clouded the accepted wisdom that emerging economies could on their own keep the global system stable and growing in an era when the industrialized world seems consigned to tepid performance. U.S. officials and companies have championed deeper U.S. economic ties with nations such as China and Brazil on the expectation that, even if manufacturing capacity and jobs relocated to those places, their growth and success would benefit the United States — a strategy that presumes those markets steadily open.